In times of economic prosperity, politicians in certain regions may ignore deep-seated socioeconomic problems. The so-called commodity supercycle in Latin America is over, lowering economic growth prospects in most of the region. As a result, the electorate — many of whom recently ascended to the middle class — is scrutinizing its political leaders more closely and demanding greater transparency and accountability. And this, for the most part, is good news for business.
In the past year, left-leaning presidents in Argentina, Bolivia, and Venezuela have lost their hold on power through various democratic processes, including referenda and presidential and/or legislative elections. The shine on Latin American populism is dimming as the region’s political pendulum swings from the left to center-right of the political spectrum.
Populism elevated millions out of poverty, helped eliminated inequality, and improved income distribution in Latin America. But for several countries in the region, these improvements were accompanied by corruption and impunity, as exemplified by the ever-widening Petrobras corruption scandal in Brazil. Populism was also responsible for constraining growth and stifling commercial competitiveness.
The movement away from so-called “benign autocrats” in the last year has ranged from messy and combative in Venezuela to somewhat surprising in Bolivia.
In Venezuela, despite the opposition coalition MUD securing a supermajority in Congress last December, President Nicolás Maduro continues to rule by decree (a sure setup for future political clashes). Maduro’s election loss was predictable given the freefall of the Venezuelan economy.
In Bolivia, President Evo Morales lost a February referendum in which he sought to reform the constitution to allow him to run for a fourth term. Morales in 2005 became the first president from the Bolivian indigenous community, and his loss was less predictable than Maduro’s, given the sharp reduction in poverty under his rule and his help for previously marginalized indigenous communities.
Surprisingly, Argentina has emerged as a bright spot in the region. Within weeks of his inauguration last December, Argentina’s President Mauricio Macri made significant shifts in economic and foreign policy, breaking with the populist agendas of former presidents Néstor Kirchner (2003-07) and his wife Cristina Fernández de Kirchner (2007-15). Macri also reversed Argentina’s alignment with hard-line leftist regimes (such as Venezuela) in Latin America.
At the highest levels, the anticipated election of more pragmatic center-right leaders in coming years is expected to correct fundamental issues that have prevented the region from attaining higher-level sustainable growth.
Institutional reform, closing infrastructural gaps (physical, technological, and others), fiscal consolidation, reducing socioeconomic inequalities in education and health care, and tackling corruption would likely be at the top of the agenda for new leaders in the region. In this regard, Brazil’s ruling Workers Party is in an increasingly tenuous position. For the commercial sphere, the pro-market leaders are expected to create more competitive and less hostile business environments.
Despite the foregoing, however, populism remains alive and well in some parts of Latin America, at least for now. Nicaragua, for instance, continues to be led by Daniel Ortega, and the nation is faced with issues of autocracy and populism and the subversion of democracy.
Regional developments in 2015 were a warning to the corrupt in the Americas, according to Transparency International (TI). Still, according to TI’s most recent ranking of countries from 1 (least corrupt) to 167 (most corrupt), not all of Latin America’s biggest countries sit at the highest end of the ranking: Brazil, for example, is ranked 76, followed by Colombia (83), Mexico (95), Bolivia (99), Argentina (107), and Venezuela (158). As a result, Dun & Bradstreet continues to advise clients in these countries to consistently implement robust corruption-risk assessment procedures and continuously review them.
Michelle Campbell is a Senior Economist on D&B’s Global Data, Insight & Analytics team. Based in the UK, she covers the Latin American region for D&B Macro Market Country Insight Products. In addition to her experience in the financial services sector, Campbell has worked as a visiting lecturer in the UK and in the Caribbean. Michelle holds a master of science degree in economics from the University of the West Indies in Trinidad.